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Yes Securities Report
Indus Towers Ltd. reported mixed performance for the quarter. While, revenue growth was slightly above estimates; Ebitda margin was below expectation.
It reported revenue growth of 4.8% QoQ, led by 1.5% QoQ increase in the number of colocations and 0.7% QoQ increase in average sharing revenue per sharing operator . There was sequential decrease in Ebitda margin (down 138 basis points QoQ) on account of higher power and fuel cost.
Average sharing factor for the quarter was 1.77 times versus 1.78 times in previous quarter. The precarious financial condition of Vodafone Idea Ltd. continues to weigh down on Indus Towers.
We expect that densification of 4G network and rollout of 5G services would drive business growth for it. The accelerated rollout of 5G in India offers strong visibility for business growth for next two years.
Also, operating margin is expected to remain strong led by focus on optimising power and fuel cost.
We estimate revenue compound annual growth rate of 5.8% over FY23‐25E with average Ebit margin of 29.6%.
We maintain our 'Add' rating on the stock with revised target price of Rs 197/share based on price-earnings ratio of 8.5 times on FY25E.
The stock trades at PER of 8.4 times/7.5 times on FY24E/FY25E earnings per share.
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